Dynamic Pricing for Demand-Side Management in the Smart Grid

Intermittent renewable energy sources and the use of smart meters introduce a significant challenge for the reliability of the smart grid. Real-time pricing is an important demand-side management mechanism for improving smart grid reliability through dynamically changing or shifting the electricity consumption of users. Presently, the dynamic real-time pricing research in the smart grid mainly focuses on the interactions between a single utility company/retailer and its users. In this paper, we consider electricity liberalization, where more than one electricity retailer can co-exist in each region, and the retailers compete or cooperate with each other to achieve the highest individual or combined revenue. Two types of electricity users are considered in this paper: traditional electricity users who pay a fixed price and opportunistic electricity users who may change the electricity demand or even turn to another electricity retailer. Two game formulations are described for the proposed real-time pricing scheme. One formulation is proposed for a totally competitive environment. Another game formulation is proposed for a cooperative environment. Some simulation results are presented to show the effectiveness of the proposed real-time pricing scheme